King v. Burwell at the Supreme Court: Oral Arguments

This blog is part of a weekly series—one that analyzes the political, legal, and social issues and ramifications of King v. Burwell, a lawsuit before the Supreme Court that threatens to undermine the Affordable Care Act (ACA). Learn about what’s at stake in King v. Burwell. 

It is often unreliable to assume predictions about Supreme Court case outcomes will be accurate. An obvious example occurred in the 2012 NFIB v. Sebelius lawsuit – the case challenging the Affordable Care Act’s (ACA) constitutionality. While the Court held that the overall ACA was constitutional, it, quite surprisingly, ruled that the Medicaid expansion mandate was not. Neither legal scholars nor those of us who heard the oral arguments predicted that outcome.

As a result, it is hazardous to rely on predictions about the outcome of the important King v. Burwell litigation. That said, for those of us who sat in the Court on March 4 and listened to the oral arguments, some noteworthy observations can be made offering significant hope that tax-credit premium subsidies will continue to be available for low- and moderate-income families in 50 states across the country.

The first observation relates to numerous comments and questions offered by Justice Anthony Kennedy, indicating that his vote in the King case is very much “in play.” This is quite significant because Kennedy was one of four Justices who strongly dissented in the NFIB case since he felt that the requirement to purchase health coverage, and hence the entire statute, should be declared unconstitutional.

To understand the key issue that Kennedy repeatedly raised during yesterday’s oral argument, it is necessary to revisit what the Court decided with respect to the Medicaid expansion mandate. On that issue, the Court held that the combination of the mandate, plus the HHS Secretary’s authority to withdraw Medicaid funding from states that did not comply with the mandate, was unconstitutionally coercive. The Court held that the potential withdrawal of federal Medicaid funds from non-complying states amounted to a “gun to the head” which, in effect, had one sovereign (i.e., the federal government) coercing other sovereigns (i.e., state governments) to do something they might not wish to do.

Justice Kennedy was clearly troubled by the anti-Obamacare plaintiffs’ view that the ACA required premium subsidies to be withheld from families in states that did not wish to set up their own exchanges. Justice Kennedy’s first comment about this occurred when he said to plaintiffs’ counsel:

[T]here is something very powerful to the point that, if your argument is accepted, the states are being told either create your own exchange or we’ll send your insurance market into a death spiral.”

This and similar comments by Justice Kennedy showed he was troubled by plaintiffs’ coercive interpretation of the ACA. Even though the King case does not raise constitutional issues, Justice Kennedy’s observations were nevertheless significant. This is because, when the Court seeks to interpret statutes, it normally does so by construing them in a way that makes them constitutional. Justice Kennedy strongly suggested that the plaintiffs’ position – which would withdraw premium subsidies in states refusing to run exchanges directly – would be unconstitutionally coercive, thereby giving credence to the government’s position that the ACA was not written in a way that conditioned premium subsidies on a state’s decision to run its own exchange.

As Justice Kennedy considers this further, his sensitivity about appropriate federalism will probably be heightened. That’s because the plaintiffs’ creative statutory interpretation – that the availability of subsidies was conditioned upon a state deciding to run its own exchange – was never considered, or deemed conceivable, by any of the states. As the amicus brief filed on behalf of 22 states makes clear, none of the states believed that their decision about running an exchange would have such a drastic impact on their residents.

The Court’s federalism concerns will need to reconcile the inescapable fact that there was no meaningful notice to states about the huge subsidy-related implications of their decisions to set up exchanges. If, as plaintiffs posit, such notice was contained in four words (“established by the state”) in a sub-sub-section focused on the size of tax-credit premium subsidies, it was the symbolic equivalent of hiding an elephant in a mouse-hole.

Another noteworthy observation about the oral argument was that the Justices understood that a decision withdrawing premium subsidies would have “disastrous consequences.” Those words were mentioned at different times during the oral argument, as was the term “death spiral”—as articulated by Justice Kennedy in the above-quoted passage—relative to what would happen with health insurance premiums in states if subsidies were withdrawn. Clearly, the Court was quite cognizant that havoc would occur if it ruled in favor of the plaintiffs.

Justices Scalia and Alito – who seemed intent on ruling for the plaintiffs – suggested that the resulting disastrous consequences would be ameliorated after the Court’s decision is issued. For example, Justice Scalia asked:

“What about – what about Congress? You really think Congress is just going to sit there while – while all of these disastrous consequences ensue . . .. Congress adjusts, enacts a statute that – that takes care of the problem. It happens all the time. Why is that not going to happen here?”

In response, Solicitor General Donald Verrilli, with a bemused expression on his face, said “Well, this Congress, Your Honor . . . ” – and laughter rang out throughout the courtroom and interrupted his response. As the laughter reflected, the prospect that Congress would restore premium subsidies, after it voted over 50 times to repeal the ACA, was clearly far-fetched.

Similarly, Justice Alito suggested that maybe the Court could “stay” the implementation of its decision “until the end of this tax year” to give time to fix the “very disruptive consequences” of a decision favoring the plaintiffs. The Solicitor General responded that, if the Court decided that premium subsidies should be unavailable in federally facilitated marketplace states, such a stay would be both legally dubious and administratively impractical given the time it takes to set up state exchanges.

Overall, the impression left by the oral argument is there is a good likelihood that the Court will ultimately rule to retain tax-credit premium subsidies in all 50 states. It is the only way to harmonize the entire statute, the congressional intent behind it, and to interpret the statute so it isn’t unconstitutional and doesn’t inflict huge damage across the country.